Threats of tariffs, government shutdowns and mass firings of government workers have sparked more economic uncertainty for Americans over the past month.

Retail sales, as reported by the U.S. Census Bureau, only slightly increased month over month in February. Kohl’s, Macy’s, Walmart and Target all tempered sales expectations in recent earnings reports. And consumer sentiment dropped to a more than two-year low, CBS News reported based on University of Michigan data.

For retail executives, the barrage of negative news has increased fears of a shopping pullback. It also makes it even more difficult for them to assess their inventory needs as many are already shifting to new suppliers with new tariffs set to begin in April. And with shoppers in a more gloomy state, price increases that retailers feel are necessary to implement because of the tariffs could prove especially detrimental.

On recent earnings calls from retailers, executives spoke about how consumers are still uneasy about their wallets and said they expect tariffs to have some impact on their spending, as well.

“Many of our customers report that they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities,” Dollar General CEO Todd Vasos said in the company’s fourth-quarter earnings call March 13. “As we enter 2025, we are not anticipating improvement in the macro environment, particularly for our core customer.” Later in the call, CFO Kelly Dilts said the company has yet to factor the consumer impact of tariffs into its sales expectation of a 1-2% increase in comp sales for the year.

“Companies are just being more cautious in terms of their outlook for ‘25 into ‘26, and it will be interesting to see how they manage it,” said Bea Chiem, retail and consumer managing director for S&P Global Ratings. “There’s a lot of uncertainty out there. Do you make these permanent changes, or are these temporary changes? How much can we withstand before we have to do all these price increases? It really does affect the supply chain, and it takes a long time to see all of this stuff come through.”

Heading into 2025, “the macro indicators were actually pretty solid, especially given unemployment was pretty low, as well, and the consumer had been holding up,” Chiem said. “Now, with all the policy uncertainties out there and potentially higher inflation for longer, it poses a difficult problem for a lot of retailers, because they were just starting to recover profits,” after several years of high inflation.

Some retailers have been buying more items from markets targeted by tariffs to store them before the levies take effect, but they also risk overloading on supply relative to sinking demand.

EMarketer’s Sky Canaves said retailers had already pulled ahead orders in the later part of 2024 or the start of this year, evidenced by a 13.4% increase in import cargo levels in January, according to the National Retail Federation. She expects that to cool off.

“They have to balance the possible tariffs against realistic consumer demand and softening demand for discretionary categories such as apparel and accessories,” Canaves said.

Scott Benedict of Benedict Enterprises, a retail consultant and former buyer for Walmart and other retailers, said retailers have largely already ordered spring and summer apparel, sports equipment, and home furnishings, but they may cut orders for summer- and fall-related merchandise dramatically. “As we saw five years ago, it’s difficult to understand all the pluses and minuses of demand,” Benedict said.

At the start of this year, there were fears around tariffs, but it was unclear whether they would actually take effect.

There were also some indicators that consumers were interested in spending more, after a couple of years of sky-high inflation. In February, Walmart’s CEO said in an earnings call that the company was encouraged by an improvement in general merchandise sales, with two consecutive quarters of comp sales growth.

“There was reason for some degree of optimism in discretionary spending that’s, to some degree, evaporated very quickly,” Benedict said.

Canaves noted, however, that when inflation reached almost 40-year highs in 2022, there were similarly big drops in consumer sentiment, and at that time, people continued to spend.

According to eMarketer, overall retail sales grew 8% in 2022. Canaves said that was driven by inflation in grocery and gasoline but that it was still a strong year for some luxury brands, premium fashion and beauty brands, off-price retailers, and value-focused retailers like Walmart.

It’s just one example of how “these kinds of issues create concerns for consumers, but they don’t necessarily translate into cutting back on spending in any significant way,” Canaves said.